Most likely, many of you have witnessed changes in the co-marketing real estate world. Marketing service agreements (MSAs) are being canceled by many lenders nationwide, both large and small. Whether you realize it or not, these MSAs directly impact the bottom line profits for many top REALTORS® and real estate brokers.
What exactly are marketing service agreements (MSAs)? Simply defined, they are when mortgage and title companies pay a monthly fee to REALTORS® or brokers to assist with marketing efforts. In exchange for this stipend, the REALTOR and/or broker performs marketing activities that also promote the mortgage or title company. Some examples include website advertising, print advertising, events or even signage. Technically, the collected monies are not intended for referrals or new clients, but for marketing that’s performed.
What is the problem? The Consumer Financial Protection Bureau (CFPB) remains focused on making sure consumers are protected in major financial transactions, including buying a home. Unfortunately, the Great Recession and subprime mortgage crisis was fueled by consumers entering into mortgages they couldn’t afford; in many cases, they were influenced by their trusted REALTOR® or loan officer who benefited financially from the transaction. Currently, the CFPB is leading the enforcement of the Real Estate Settlement Procedure Act (RESPA) laws that prohibit mortgage and title companies from giving compensation to REALTORS® and brokers in exchange for their coveted clients or “kickbacks.”
Is this problem temporary? Any time a lender or title company physically gives money (or a kickback) to a REALTOR® or broker for any reason, they run the risk of appearing as though they are illegally compensating, or disguising an attempt to illegally compensate, that REALTOR® or broker in exchange for referrals.
The CFPB and other regulatory bodies take these offenses seriously, so it’s crucial that proper due diligence is performed and meticulous records are maintained if you have any hope of proving your unequivocal innocence in the event of an audit. Many of the marketing services agreements in place today lack the proper backup documentation that would be required to justify the direct payments made under such an agreement. REALTORS® and brokers are too busy or simply not organized enough to maintain proper records and evidence of the marketing services they perform. In some cases, many are not even performing the services at all.
What’s the solution to adapt your business? First and foremost, leverage technology and deploy marketing dollars for actual co-marketing to grow the mutual businesses of both you and your trusted business partners. The regulations do not prevent like-minded professionals from jointly investing in marketing to grow their mutual businesses together. There is a common target customer, the homebuyer. If the law is followed and you each invest monies proportionately, you can market across different channels that include websites, neighborhood postcards, or even paid social campaigns.
You have to each financially contribute the same to gain the same. For example, picture a typical billboard advertisement. The REALTOR® cannot have 80 percent of the billboard space and pay 30 percent of the cost, while the loan officer has 20 percent of the space and covers 70 percent of the cost. To be within the RESPA guidelines, they each would pay 50 percent and have 50 percent of the billboard space, or the space could stay at 80 percent and 20 percent but the costs would be allocated respectively.
The “Big Win”
Thrive with the changes! Look into finding a compliant marketing partnership (CMP). These partnerships are compliant with RESPA and track marketing percentages, costs and have reporting built in so you have the required documentation for any compliance audits. Instead of spending valuable time defending your MSA and jumping through hoops to get approved, get ahead of the industry and get your business thriving.
These partnerships (CMPs) between industry entities can lower customer acquisition costs and expand business because co-marketing is deployed as a benefit to all parties and isn’t merely dollars changing hands in the hopes of gaining a client or sale someday. Assuming you leverage technology and use CMPs, the collaborations and partnerships will also result in an improved customer experience.
Five Keys to Success in Co-Marketing Partnerships:
Set up centralized tracking for all your co-marketing activities through a CMP or your own system.
Always pay the marketing vendors separately. Pay your portion directly.
Do develop a road map spelling out each marketing campaign and the budgets, the production and distribution channels so there are no questions or discrepancies.
Do not pay less than your exact proportional share of a marketing campaign.
Do collaborate with your partners to constantly improve the consumer experience.
Of course co-marketing changes are evident and need to be taken seriously. But don’t be afraid to adapt to them and thrive in your business partnerships and your business growth. Follow the five steps above to have compliant co-marketing, win-win partnerships, happy consumers and a thriving business!
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